Petrobras Posts Big Profit Right After Bolsonaro Says It Is Too Profitable

October 29, 2021

A Petrobras FPSO offshore Brazil - File image: Petrobras
A Petrobras FPSO offshore Brazil - File image: Petrobras

Brazil's Petrobras posted third-quarter results on Thursday that smashed profit and margin estimates, less than two hours after President Jair Bolsonaro said the state-run oil company was too profitable and would have to contribute more to society as a whole.

While the company is recording rising profits, its policy of pricing domestic fuel in line with international rates is drawing ire in the capital Brasilia as Brent crude prices rise.

Many politicians appear to want the firm to lower prices or at least refrain from further hikes, a move that would seriously hurt the company's bottom line but please voters heading into an election year.

As Brazil's main importer and producer of fuel, Petrobras effectively controls domestic prices for diesel and gasoline. Past governments have forced the company to take huge losses in order to keep prices at the pump artificially low.

"It should be a company that makes a profit that isn't so high as it has been lately," Bolsonaro said during a weekly live broadcast on social media. He added he would seek to alter the company's pricing policy.

Shortly after Bolsonaro's broadcast, the company posted a third-quarter profit of 31.14 billion reais ($5.34 billion), well above the Refinitiv estimate of 20 billion reais. Earnings before interest, taxes, depreciation and amortization, or EBITDA, came in at 60.74 billion reais.

One-off items significantly buoyed net income. The company reversed a decision made at the beginning of the COVID-19 pandemic to revise down its long-term projections for Brent prices, which boosted the value of its assets. Divestments and a victory in a major tax dispute also helped.

Stripped of non-recurring items, Petrobras said, quarterly net income would have come to 17.37 billion reais.

Gross debt fell to $59.59 billion, hitting Petrobras' goal of bringing debt below $60 billion ahead of a 2022 target.

Petrobras also approved an extraordinary dividend payment of 31.8 billion reais, according to a Thursday filing. The company had resumed annual dividend payments in 2018, but this marks only the second extraordinary dividend since Petrobras changed its bylaws to allow such payments a year ago.

Shortly after the results were published, Brazilian Senate leader Rodrigo Pacheco told reporters he was planning to hold a meeting with Petrobras' executive board to see how fuel prices could be contained.

($1 = 5.65 reais) 

(Reporting by Gram Slattery and Marta Nogueira; Additional reporting by Stephen Eisenhammer in Sao Paulo; editing by Diane Craft, Stephen Eisenhammer and Chris Reese)



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